Blog Post

Zillow IPO gets warm welcome — but will it last?

Zillow (s Z), the real estate listing site, held an initial public offering of its stock on the Nasdaq exchange Wednesday morning. The stock, which is trading under the single letter ticker symbol “Z”, received a warm welcome from public market investors right out the gate.

Zillow’s stock hit the market at 10:35am Eastern Time at a price of $46.56 $57 per share, more than doubling the IPO price of $20 the company announced Tuesday afternoon. But the stock proved somewhat volatile in its first few hours of trading. By 12:20pm ET, the stock had dipped to $33.24.

Despite the ups and downs, Zillow’s IPO has already been far more successful than the company initially projected. When Zillow filed its first S-1 in April, it expected its IPO to raise a maximum of around $50 million. Zillow initially proposed its stock to be priced at $12-14 but earlier this month, it raised that range to $16-$18, and ultimately bumped it up to an IPO share price of $20. The IPO held this morning brought in $70 million for Zillow.

And all this from a company that has yet to turn a profit. Zillow made nearly $30.5 million in revenue in 2010, but ultimately posted a net loss of about $6.8 million for the year, according to regulatory filings. Ostensibly, the $70 million Zillow made in Wednesday morning’s IPO will be put toward initiatives that will boost the business’ bottom line.

It bears mention that a strong debut does not ensure that a stock will continue to be popular in the long term — or even in the short term. Internet radio company Pandora hit the New York Stock Exchange on June 15 at $20 a share, 25 percent higher than its $16 IPO share price. But since then, Pandora’s (s P) stock has had a somewhat tepid response from the public market, and has not hit the $20 mark since July 1. And like Zillow, Pandora has not started to turn a profit despite being a hugely popular consumer web destination.

The good news for all newly public companies is that ultimately stock performance should be viewed through a much wider scope than a few hours, or even a few months, can provide. After all, an IPO is meant to be the start of a long journey toward sustainable growth, and not an end in itself.